In a Lost Decade, We Had Big Winners

By nearly every measure, average Americans lost ground in the “Aughts.” They’ve been losing ground — to the rich — for three full decades now. Will the ‘Teens’ make that four?

Pawn shops always do well in recessions. CEOs of pawn shops, at least these days, do even better. At EZCorp, the Texas-based regional chain that runs over 670 pawn shops and payday loan storefronts, CEO Joseph Rotunda just picked up a 20 percent salary hike.

CEOs do better. Can any three words more aptly sum up the decade we put to rest last week? For power suits, an uninterrupted string of windfall paychecks. For everyone else, the insecurity of the worst economic times in over 70 years.

Actually, by one economic measure, the first decade of the 21st century turned out to be America’s worst ever. The stock market ended the “Aughts” with the poorest calendar decade performance record in U.S. investment history.

Adjusted for inflation, stocks lost an average of 3.3 percent a year during the ’00s. Back during the 1930s, the previous worst-performing decade, stocks averaged an 1.8 percent annual gain.

If you have your retirement tied to a 401(k), you’re already feeling the stock market woes — and reeling from them. Most Americans working at major companies used to have pensions that tied checks to years worked. You labored 35 years, you knew exactly what your pension check would be. Most retirement plans today, by contrast, offer workers no such guarantee, only stock. If share prices fall, you lose at retirement time.

These accounts let executives set aside — and defer from taxes — far more than the $16,500 maximum that ordinary workers can defer into 401(k)s. But these accounts go one giant step further. They typically guarantee the executives who hold them a guaranteed investment return on their deferred dollars.

In 2008, a Wall Street Journal report has just revealed, cable giant Comcast paid its top execs a way-above-market-rate 12 percent interest on the dollars they had parked away in their deferred-compensation accounts. For Comcast VP Stephen Burke, that 12 percent guarantee generated $7.4 million.

And Comcast’s 70,000 regular employees? Over the same period, their 401(k)s, dependent on the vagaries of the stock market, dropped 28 percent in value, a collective loss of $649 million.

We don’t have figures yet for 401(k) losses in 2009. In 2008, says the Boston College Center on Retirement Research, 401(k)s overall fell at least $1 trillion.

A sizeable piece of that misfortune befell the 1.2 million workers in Wal-Mart’s 401(k). Their retirement nest-eggs took a 18 percent hit. But Wal-Mart gave CEO H. Lee Scott Jr. a guaranteed 6.6 percent return on his supplemental retirement savings. Scott’s gain: $2.3 million.

Lee Scott almost perfectly personifies our just completed decade’s CEO story. He moved into the Wal-Mart chief executive slot right at the start of the ten years, in January 2000, and retired last January 31. His predecessor, David Glass, averaged $4.5 million a year in the five years before Scott took over. Scott, in his first four years as CEO, averaged $23 million.

In his last full year at Wal-Mart’s summit, Scott took home $30.2 million, over 1,500 times the average $19,200 pay that went that year to Wal-Mart workers.

Our executive gravy train didn’t start, of course, in the Aughts. The CEO pay spiral actually began turbo charging two decades earlier, in the early 1980s, a time when top execs were still averaging only 30 to 40 times more take-home than their workers.

Forbes, the business magazine, conveniently started keeping score of Corporate America’s biggest windfall winners about that same exact time. In 1982, in the magazine’s first annual list of America’s 400 richest, Forbes reporters counted just 13 billionaires. The current count: 359.

The total top 400 today hold $1.27 trillion in wealth. Since 1982, the wealth of the Forbes top 400 has jumped an amazing 12 times faster than inflation.

How much of this good fortune has “trickled down” to average American families? Average American families with children, headed up by someone under age 50, hold less net worth today, after inflation, than they held back in 1983.

Journalist David Cay Johnston, in an analysis just published in the widely respected Tax Notes journal, is calling that finding — teased from data collected by Barry Bosworth and Rosanna Smart for the Brookings Institution — simply “stunning.”

How much longer will growing inequality in the United States continue to generate such stunning stats? Will the “Teens” turn our 30 years of rapidly growing inequality into 40?

Or will the Teens, like the Depression 1930s, set the stage for an explosion of equality that totally reinvigorates American life and labor?

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Should Americans treat the nation's super rich as a distraction from more pressing concerns or a clear and present danger? No question may more deeply divide the opposition to Donald Trump, and the answer to that question, Gallup polling suggests, has changed significantly at the Democratic Party's grassroots level. Will that change now shape the imminent 2020 presidential election campaign?

About Sam Pizzigati

Labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits Inequality.org. Among his books: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970 (Seven Stories Press, 2012) and The Case for a Maximum Wage (Polity, 2018).